Do you want to know more about inheritance? If you have a valuable estate, you want to make sure that your loved ones can benefit from your hard work over the years. It is essential to learn more about inheritance tax planning and how this can affect your estate.
What is Inheritance Tax?
First of all, we need to clarify what inheritance tax actually is. Basically, this is a tax that has to be paid on someone’s estate when they die. This is taking into account all of their estate, such as the money that they have in bank accounts, the property they own and all of their possessions combined.
The amount of inheritance tax that will come off the estate will depend on how much it is worth. For example, if the estate is under the Nill Rate Band or NRB in the UK, you do not have to pay any inheritance tax. However, if your estate is going to be worth more than this rate, you could pay up to 40 percent in tax.
Start with Valuing Your Estate
When you are inheritance tax planning, you need to start by knowing the value of your entire estate. Therefore, you need to work out all of the assets you have and what their value is. Do not forget to deduct any debts that you know you have from this amount. Remember that your assets are everything that you own, such as properties, jewellery, vehicles and land.
Know What You Want to Achieve
Of course, the goal of inheritance tax planning is ultimately to reduce the amount of tax that is going to be paid from your estate. But you also have to think about what you want to achieve with your estate. For example, what family members do you want to inherit your property? Would you like to leave money to a charity? Have a plan for your estate first before looking at ways to reduce tax.
Ways You Can Reduce Heritance Tax
There are a few ways that you can legally reduce the amount of inheritance tax that will be paid from your estate. Here are some examples.
Consider an Overseas Pension
An overseas pension can be a good way to reduce the amount of inheritance tax that you pay. Some options can mean that you do not pay any, for example, for a QROPS. Of course, this will depend on the country that you are moving your pension to. You can always seek advice from https://tailormadepensions.eu on this option.
Leave Money to Charity
Do you have a charity that you care a lot about? You can donate from your estate so that they can benefit. This is going to lower the amount of inheritance tax that is going to be paid when you die. You can enjoy the best of both worlds; your family benefit and so does your favourite charity.
Create a Trust for Your Family
Creating a trust for your loved ones can be a good way to ensure they benefit from your estate. You can set up a trust that can be used when they are older or in certain circumstances. The trust is going to be separate from your estate and not be subject to any inheritance tax.